U.S. Circuit Rulings Complicate Key International Arbitration Decisions

The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal .... The order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or upon the application of any interested person ... (emphasis added)

The unresolved issue is whether international arbitration tribunals—convened pursuant to contractual dispute resolution provisions—are “foreign or international tribunals.” The four circuits that have ruled on the issue are split as to whether international arbitration falls under the scope of § 1782(a).

Fourth Circuit’s Ruling Is Latest Decision Interpreting Breadth of “Tribunal”

On March 30, 2020, the Fourth Circuit, in Servotronics, Inc. v. Boeing Co., held that a tribunal seated in the United Kingdom constituted a “tribunal” within the meaning of § 1782. This came just six months after the Sixth Circuit came to a similar conclusion in Abdul Latif Jameel Transp. Co. v. FedEx Corp., which involved a tribunal seated in Dubai. These decisions came years after the Second and Fifth Circuits narrowly interpreted “tribunal” to include only “governmental or intergovernmental arbitral tribunals and conventional courts and other state-sponsored adjudicatory bodies,” which preceded the Supreme Court’s decision in Intel Corp. v. Advanced Micro Devices Inc.

In that 2004 decision, the Supreme Court ruled that § 1782 gave federal courts broad discretion to permit foreign litigants to obtain discovery in the United States, subject to certain guidelines. The Court in Intel considered whether the European Court of Justice qualified as a “foreign or international tribunal.” In finding that it did, the Court determined that § 1782 “reflects Congress’ recognition that judicial assistance would be available ‘whether the foreign or international proceeding or investigation is of a criminal, civil, administrative, or other nature.’” However, Intel did not directly address whether § 1782 extended to international arbitration.

Prior to Intel, the Second and Fifth Circuits had ruled that § 1782 was not intended to authorize federal courts to assist discovery in international arbitrations. In National Broadcasting Co. v. Bear Stearns & Co., the Second Circuit focused on the statute’s legislative history in ruling that “there was no question” that the statute applied only to intergovernmental tribunals or other state-sponsored adjudicatory bodies. Likewise, in Republic of Kazakhstan v. Biedermann Int’l, the Fifth Circuit ruled that “[r]eferences in the United States Code to ‘arbitral tribunals’ almost uniformly concern an adjunct of a foreign government or international agency.” Both decisions stressed policy concerns regarding the application of § 1782 to international arbitration—namely, (a) imposing burdensome discovery on parties that agreed to arbitration in order to avoid this issue; and (b) parties attempting to use U.S. courts for a tactical advantage.

The Sixth Circuit followed a different analytical path in Abdul Latif Jameel Transp. Co., focusing on statutory interpretation while questioning the reliability of legislative history. Specifically, the court gave great weight to the Supreme Court’s emphasis in Intel on the “decision-making power” of the European Commission. The Sixth Circuit also emphasized a district court’s “substantial discretion to shape discovery under § 1782(a)” to ease concerns that authorizing discovery in private commercial arbitration would defeat a principal purpose of arbitrating disputes—saving discovery costs typically associated with litigation.

In March 2020, the Fourth Circuit in Servotronics, Inc. v. Boeing Co. found that § 1782 reflects Congress’s long-standing policy of facilitating cooperation with foreign countries to provide “federal-court assistance in gathering evidence for use in foreign tribunals.” Examining the legislative history of § 1782, the court found this policy exemplified in Congress’s replacement of the phrase “in any judicial proceeding pending in any court in a foreign country” with “in a proceeding in a foreign or international tribunal.” Finally, the court disagreed with the holdings of Bear Sterns and Biedermann, concluding that because “arbitration in the United States is a congressionally endorsed and regulated process that is judicially supervised” through the Federal Arbitration Act, private international arbitration is a product of “government-conferred authority.”

Uncertainty from Circuit Split Impacts Key International Arbitration Strategy

The Fourth Circuit’s decision reflects a potential trend of federal courts expanding their role in foreign international arbitrations. In other words, a party’s arbitration strategy should now consider whether a U.S. district court may have a role in what is usually a very limited discovery process. Tactical pre-arbitration considerations typical of foreign international arbitrations, including key decisions such as which parties to include in the arbitration and which agreements should be the basis for claims, will also have to include considerations of unexpected U.S. discovery. For instance, an international company with dealings in the U.S. may decide against bringing a certain claim against a certain party or pursuant to a certain contract because a U.S. court may order discovery that otherwise would not occur. Until all of this is resolved, foreign parties should consider which U.S. jurisdictions are touched by their dealings when deciding whether to initiate a foreign international arbitration. (For example, does one foreign company hesitate to bring a claim against another foreign company because certain evidence lies in a U.S. jurisdiction that allows for discovery?) Certain parties may take advantage of these holdings by strategically filing foreign arbitrations with the knowledge that they can rely on certain U.S. courts to grant discovery normally unavailable in foreign arbitration.  

The circuit split also threatens to negate the international arbitration community’s efforts regarding cost savings, efficiency and predictability, as parties to existing contracts may be unsure whether they will be exposed to discovery in jurisdictions that have not decided the issue. Going forward, parties should be aware of these decisions, as well as relevant decisions from district courts, in negotiating and drafting their contracts, and thoughtfully consider their forum selection clauses and choice-of-law provisions.

In closing, there may be a light at the end of the tunnel. The Servotronics decision may soon be taken up by the Supreme Court to resolve the issue of whether international arbitrations qualify as a “tribunal” under the statute, as Rolls-Royce intends to file a petition for writ of certiorari before a June 28 deadline.

Pillsbury’s International Arbitration lawyers have the perspective and experience to resolve disputes before arbitral forums in proceedings throughout the world, and in related litigation. Practice members have appeared before arbitral tribunals for governments, investors, developers, equipment manufacturers, construction companies and others in venues in the Middle East, Europe, North America, South America and Asia.